Legislation to eliminate sheep exports within five years and end trade in the Middle East during the summer has gone to the Senate.
The private bill, co-sponsored by the Greens along with independents Derryn Hinch and Tim Storer, authorized the upper house 31 votes to 28 on Monday.
However, to enter into force, the ban would have to go through the House of Representatives.
But liberal parliamentarians Sarah Henderson and the recent escalation of Sussan Law to the bank forced them to abandon a promise to cross the floor on the subject.
Earlier, cross-border senator David Leyonhjelm accused animal welfare advocates of racism for wanting to end live sheep exports to the Middle East.
"The calls to ban live exports are wrong from any point of view, they are racist, imperialist, arrogant and anti-Roma," Senator Leyonhjelm told parliament.
Senator Leyonhjelm, who used to work as a veterinarian and agribusiness consultant, said the debate had nothing to do with animal welfare.
"The people who buy our sheep are brown and those who do not want to sell them, our sheep despise them," he said.
"Imagine if these brown people tried to stop us from eating ham at Christmas by refusing to sell us pigs."
He said that living Australian exporters had better standards of animal welfare than any other country, arguing that the general standards would be raised by sending more sheep abroad.
Green Senator Mehreen Faruqi urged her colleagues to answer thousands of messages from Australians to end the "trade in poverty."
"The live export trade is simple and totally incompatible with animal welfare," said Senator Faruqi.
"This is really a historic day when animal welfare issues have reached the floor of the Senate, today is the time to ban exports live."